200 Price <strong>in</strong>dex (2000 = 100) 150 100 50 Australian consumer price <strong>in</strong>dex Vanuatu consumer price <strong>in</strong>dex Vanuatu <strong>sandalwood</strong> price <strong>in</strong>dex 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Figure 20. Relative changes <strong>in</strong> consumer price <strong>in</strong>dex and m<strong>in</strong>imum price paid to <strong>smallholder</strong>s <strong>for</strong> <strong>sandalwood</strong> heartwood <strong>in</strong> Vanuatu between 1980 and 2009. Prices are <strong>in</strong>dexed to a unit value of 100 <strong>in</strong> <strong>the</strong> year 2000. (Sources: Australian Bureau of Statistics; Vanuatu Statistics Office; Vanuatu Department of Forests Annual Trad<strong>in</strong>g Season Announcements) While native supplies of Indian <strong>sandalwood</strong> have decl<strong>in</strong>ed considerably, demand has rema<strong>in</strong>ed relatively constant, and has pushed <strong>the</strong> price of <strong>the</strong> commodity up significantly over <strong>the</strong> past few years. Legally sourced Indian <strong>sandalwood</strong> currently trades at between A$30,000 and $85,000 per tonne, with sapwood prices rang<strong>in</strong>g from $1,000 to $2,500 per tonne (Adviser Edge 2008). A 17-fold <strong>in</strong>crease <strong>in</strong> <strong>the</strong> price <strong>for</strong> Indian <strong>sandalwood</strong> has been recorded s<strong>in</strong>ce 1990 (Figure 21), which is also reflected <strong>in</strong> <strong>the</strong> fivefold <strong>in</strong>crease <strong>in</strong> price <strong>for</strong> Indian <strong>sandalwood</strong> oil <strong>in</strong> <strong>the</strong> 7 years from 2001 to 2007 (Figure 22). The price growth <strong>for</strong> Indian <strong>sandalwood</strong> is considered to be unsusta<strong>in</strong>able at its current levels (approximately 23% compounded over 15 years), with a proportion of Indian <strong>sandalwood</strong> rema<strong>in</strong><strong>in</strong>g unsold at recent auctions <strong>in</strong> India (Adviser Edge 2008). The <strong>in</strong>troduction of high-quality syn<strong>the</strong>tics <strong>in</strong>to <strong>the</strong> market may also reduce <strong>the</strong> potential <strong>for</strong> fur<strong>the</strong>r <strong>sandalwood</strong> oil price <strong>in</strong>creases. Over <strong>the</strong> past 10 years, <strong>the</strong> price of Australian <strong>sandalwood</strong> has also cont<strong>in</strong>ued to <strong>in</strong>crease, <strong>in</strong>dicat<strong>in</strong>g an unsatisfied demand <strong>for</strong> <strong>the</strong> commodity worldwide. Yet despite <strong>the</strong> market potential and demand <strong>for</strong> Australian <strong>sandalwood</strong>, it still does not attract <strong>the</strong> premiums of Indian <strong>sandalwood</strong>. Heartwood prices <strong>for</strong> Australian <strong>sandalwood</strong> range between AU$3,000 and $16,500 per tonne (AAG 2006). Despite recent activity <strong>in</strong> plant<strong>in</strong>g S. album and S. spicatum <strong>in</strong> Western Australia, <strong>the</strong> majority of current product on <strong>the</strong> market cont<strong>in</strong>ues to be sourced from natural populations. Due to overexploitation and lack of protection <strong>for</strong> <strong>the</strong> resource <strong>in</strong> many produc<strong>in</strong>g countries, India and Australia are <strong>the</strong> dom<strong>in</strong>ant suppliers of <strong>sandalwood</strong> <strong>in</strong> global markets (AAG 2006). Supply and demand challenges Reliable supply As <strong>sandalwood</strong> supply has been constra<strong>in</strong>ed, some purchas<strong>in</strong>g companies, <strong>in</strong>clud<strong>in</strong>g perfume companies, have not been able to obta<strong>in</strong> <strong>the</strong> critical mass needed to justify featur<strong>in</strong>g <strong>sandalwood</strong> <strong>in</strong> <strong>the</strong>ir products. The global fragrance market favours natural products, such as <strong>sandalwood</strong>, and will <strong>the</strong>re<strong>for</strong>e prefer <strong>the</strong>se products over syn<strong>the</strong>tic <strong>in</strong>gredients, but only when a critical mass supply can be guaranteed, at a commercially viable price (Adviser Edge 2008). 49
90,000 80,000 70,000 Price (A$/tonne) 60,000 50,000 40,000 30,000 20,000 10,000 0 1990 1992 1994 1996 1998 Year 2000 2002 2004 2006 Figure 21. Indian <strong>sandalwood</strong> auction prices, 1990–2006 (Source: Adviser Edge 2008) 2500 2000 Price (US$/kg) 1500 1000 500 0 2001 2002 2003 2004 Year 2005 2006 2007 Figure 22. Indicative prices of Indian <strong>sandalwood</strong> oil, 2001–07 (Source: Tropical Forestry Services) 50
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